After 470 pages of dense data-driven analysis, full of truly
appalling information about the unequal distribution of wealth and income in
the modern world, we come at last to Part Four of CAPITAL in the Twenty-First Century, to which Piketty gives the
title "Regulating Capital in the Twenty-First Century." These one hundred pages were a big
disappointment to me. After everything I
had read, I expected Piketty to come out swinging with a series of radical
proposals for the thoroughgoing reformation of capitalism, if not its replacement
by a new social and economic order.
Instead, we get a discussion of taxation, followed by a utopian proposal
for taxing world accumulations of capital.
To summarize his recommendations in a sentence: Picketty offers reasons for thinking that
taxation on incomes is not likely to halt or even slow the steady growth of
patrimonial capitalism, and opts instead for a "global tax on
capital." He appears to be aware of
the impossibility of instituting such a global tax [who on earth would
administer it?], but he writes as though he thinks that something might be
accomplished, to start, in the European Economic Union. He has little or nothing to say about what might
be done with the money raised by this tax, were it to be imposed. [He has in mind perhaps a 1% annual tax on
wealth.]
Why this complete disconnect between the trenchant power of
Piketty's analysis and the feebleness of his proposals for action? It is not enough to say that he is an
economist, not an activist, for he is what the French call a man of the left,
and his life choices constitute a rejection of the isolation from reality that
he decries in the American academic world.
I am tempted, I admit, to trace the weakness of Piketty's
proposals for change to a biographical passage [which I have been utterly
unable to find, after hours of searching, but which I swear I read!] Piketty tells us that his parents took part
in the Paris student demonstrations of 1968, but that he was born afterwards
[in 1971] so that he is free of the Marxist [by which he seems to mean
Stalinist] baggage of those times.
[Please, please, if anyone knows where the passage is, tell me. It is driving me nuts.] Those demonstrations had a profound effect on
the very geography of Paris. In the part
of Paris where my little apartment is, the wonderful old cobblestones were
ripped up and the streets were paved over so that future demonstrators would
not have the materials for barricades ready to hand, while the Sorbonne, home
territory to the rebellious students, was broken up into a number of branches
and scattered all over the city, on the theory, I suppose, that this would
discourage revolutionary activity.
Piketty has an extremely curious relationship to Marx. He has clearly read him, he refers to him
frequently, and yet he cannot stop explaining why Marx has nothing important to
teach us about capitalism, or indeed about capital. Here is an extract from the six page
Conclusion that closes the book:
"The inequality r
> g implies that wealth
accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental
logical contradiction. The entrepreneur
inevitably tends to become a rentier, more and more dominant over those who own
nothing but their labor. Once
constituted, capital reproduces itself faster than output increases. The past devours the future." [p. 571]
With a few adjustments in jargon, that passage could have
come straight from the pages of Das
Kapital. Indeed, omit Piketty's weak,
rather hesitant Part Four, and the entire impressive massing and analysis of
data in the book could be viewed as an overwhelmingly powerful confirmation of
Marx's dark vision of capitalism. And
yet, Piketty shrinks from such an identification, dismissing Marx's theories as
inadequately grounded in the available data and motivated by political concerns
rather than economic insight. What is
going on?
I honestly don't know, but I am going to hazard a guess, based on hints I
find in the text. This portion of my
remarks must be taken with even more than the usual helping of salt, because in
addition to lacking any formal training as an economist, I also lack the sort
of immediate familiarity with the French academic and intellectual scene that
would help me to place Piketty in his intellectual milieu.
As we have seen, the object of Piketty's greatest concern is
the re-emergence of patrimonial capitalism, of a capitalism dominated by those
who have inherited their wealth rather than acquired it themselves. Many passages suggest that Piketty sees this
as a question of fairness or social justice [there is even a footnote reference
to Rawls at one point]. But another
specter is haunting Piketty, the specter of destabilization. The threat of destabilization appears in the
Introduction, where Piketty writes that "if the rates of population and
productivity growth are relatively low, then accumulated wealth naturally takes
on considerable importance, especially if it grows to extreme proportions and
becomes socially destabilizing. ... Accumulation ends at a finite level, but
that level may be high enough to be destabilizing." [p. 10]
Several pages later, he writes, "The second conclusion, which is
the heart of this book, is that the dynamics of wealth distribution reveal
powerful mechanisms pushing alternately toward convergence or divergence. Furthermore, there is no natural, spontaneous
process to prevent destabilizing, inegalitarian forces from prevailing
permanently." [p. 21] And
two pages further on, "there is a set of forces of divergence associated
with the process of accumulation and concentration of wealth when growth is
weak and return on capital is high [i.e., when r is significantly greater than g RPW]
This process is potentially more destabilizing ... and it no doubt
represents the principal threat to an equal distribution of wealth over the
long run." [p. 23]
Nowhere in the almost six hundred pages of this huge book
does Piketty ever tell us what he means by "destabilization." There is a tiny clue on page 472. "The main reason why the crisis of 2008
did not trigger a crash as serious as the Great Depression is that this time
the governments and central banks of the wealthy countries did not allow the
financial system to collapse and agreed to create the liquidity necessary to
avoid the waves of bank failures that led the world to the brink of the abyss
in the 1930s."
The brink of the abyss. Considering how bad things were in the '30s,
what would have been so much worse as to qualify as an "abyss"? The only thing I can suppose Piketty has in
mind is a political revolution. I
cannot be sure because he never tells us, but I think the destabilization Piketty fears is a political uprising, outside of
the usual procedures of democratic government, fueled by popular outrage at the
extreme inequality of inherited wealth that he labels patrimonial capitalism.
Now, let us remember.
Piketty is a man of the left, an advisor to the French Socialist Party
and to its 2007 presidential candidate, Ségolène
Royal. It is surely not democratic socialism that
Piketty fears, at least not the rather tepid version that now passes for
socialism in France. My speculation --
and it really is only that -- is that Piketty fears a right-wing uprising, a revanchist resurgence of the fascism
that always lurks below the surface in modern Europe. [Just today, as I have been writing these
words, I read that in local elections, the far right National Front party of
Marine Le Pen has won upset victories in ten or eleven towns over the socialist
candidates.] We on the left here in
America have never had a viable nationally competitive socialist party
[although, to be sure, my grandfather won election on a socialist ticket to the
New York City Board of Alderman in 1917 -- our family's proudest day], so we
may long for an uprising from the left. But
we have also never suffered a fascist putsch.
Well, as I say, this is all just speculation.
What do I think
about the economic inequality whose history, tendency, structure, and
lineaments Piketty has so brilliantly portrayed? Let me close this lengthy review by offering
some observations, some suggestions, and some alternatives to Piketty's global
tax on capital.
Piketty's central discovery, if we may call it that, is that
contemporary capitalism is over the long run steadily transferring huge
quantities of wealth from the poor to the rich, reconstituting thereby the
inherited or patrimonial privilege and power characteristic of Europe in the
eighteenth and nineteenth centuries.
This fact may come as a surprise to professional economists, but it does
not particularly startle those of us who have squandered our youth and idled
away our maturity reading Karl Marx. All societies exist for the purpose of
transferring wealth from those who create it -- the poor -- to those who do not
-- the rich. The academic professions
exist for the purpose of rationalizing this transfer, the churches exist for
the purpose of blessing it, and the arts exist for the purpose of decorating
the transfer so as to make it as charming as possible [even though this often
comes to nothing more than putting lipstick on a pig.]
In the early stages of the development of capitalism,
capital, which is to say the accumulated and unconsumed product of past labor,
is owned by those who manage its deployment for new production of goods and
services. But as capitalism evolves, the
structure of capital changes. The
ownership of the capital remains private, but its organization is progressively
socialized. [Once again, I must refer
readers to my paper, "The Future of Socialism," archived at box.net
and accessible via the link at the top of this blog.] The essential work of the management of
capital is separated from ownership and placed in the hands of a cadre of
professional managers [Piketty's "supermanagers," among them.] Modern multi-national corporations are
marvels of the rational organization of capital. Their ownership, as opposed to their
management, is dispersed among countless shareholders, who may well be wealthy
individuals but may as well be pension funds of public employees.
Piketty's little inequality, r > g, conceals a vitally important truth. The rate of return on capital, r, is in part determined by the share of
the annual product that goes to wages for those whose labor creates that
product. Regardless of the fantasies of
marginal productivity, invented to provide a quasi-mathematical excuse for the
exploitation of the working class, there is nothing to stop a society from
deciding collectively that the entire
annual product of the economy shall be divided into one portion saved to create new capital, a second
portion set aside to pay for social services and activities, and a third portion paid as wages to the individuals engaged
in one way or another in the production of the annual output. Included in the second portion will of course
be pensions for those no longer working, education for those not yet working, health
care for those who need it [including those unable to work], and any other
public undertakings democratically decided upon. None
of the annual product need be reserved as "profit" for those who
hitherto have successfully asserted legal ownership of the society's
accumulated capital. In short, every
society, including ours, has a real and continuing need for capital, but our society no longer has
any need at all for capitalists.
How on earth can we transform modern capitalist society into
a society without capitalists? After all,
as good old Marx reminds us, "Philosophers have hitherto only interpreted
the world in various ways; the point is to change it."
Well, I am about to depart on a two-week safari, so I will
politely defer a full answer to this little question until I return [hem
hem].
I remain enlightened
by Piketty's book, educated by it, helped by it in thinking about the evolution
of capitalism in America, and disappointed by the timidity of the concrete
steps he proposes to address the threat of growing entrenched economic
inequality. But that just means that we
here in America have work to do. I urge
you all to get a copy of CAPITAL in the
Twenty-First Century and read it carefully.
I believe it will repay the effort.
When I return from my trip abroad, if there is sufficient
interest, I shall be very happy to continue discussing the many issues raised
but not resolved in this extended review.